Upper Deck Company v. Konami Marketing, Inc. et al, No. 2:2008cv01737 - Document 59 (D. Nev. 2009)

Court Description: ORDER Denying 10 Motion to Dismiss. Granting Motion to Transfer to Central District of California. Signed by Judge Robert C. Jones on 9/17/09. (Copies have been distributed pursuant to the NEF - AXM)
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Upper Deck Company v. Konami Marketing, Inc. et al Doc. 59 1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 THE UPPER DECK COMPANY, a Nevada corporation, 7 Plaintiff, 8 vs. 9 10 11 KONAMI MARKETING, INC. a California corporation; and KONAMI DIGITAL ENTERTAINMENT, INC., and Illinois corporation, Defendants. 12 ) ) ) ) ) ) ) ) ) ) ) ) ) ) 2:08 -cv-01737-RCJ-GWF ORDER 13 14 I. INTRODUCTION 15 This matter comes before the Court on Defendant’s Motion to Dismiss or Transfer to Central 16 District of California. (#10). Defendant alleges that an action filed and litigated in the Central 17 District of California involving the parties necessitates the dismissal of this action, based on first-in- 18 time principles and apparent “forum shopping” by Plaintiff. In the alternative, Defendant moves for 19 transferring the action to the Central District as venue is proper there and it would be more 20 convenient for the parties and witnesses. Plaintiff refutes dismissal and transfer as it alleges to be 21 a Nevada corporation and that the events concerning the action took place in Clark County. 22 IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss is DENIED. IT IS 23 FURTHER ORDERED that Defendant’s Motion to Transfer, in the alternative is GRANTED. 24 (#10). 25 Dockets.Justia.com 1 II. BACKGROUND 2 Konami Digital Entertainment is the manufacturer of Yu-Gi-Oh! Trading Card Game and 3 headquartered in Los Angeles. Konami Marketing, Inc. was located in Los Angeles, but ceased to 4 exist in 2005. Konami brought a suit against Vintage Sports Cards, the wholesale distributer who 5 sold counterfeit Yu-Gi-Oh! “Rare Cards” to a Toys-R-Us store in California in October 2009. In 6 an amended complaint in that litigation on December 11, 2008, Konami named Upper Deck 7 Company, its exclusive distributor of the cards, as a co-defendant as it believed Upper Deck supplied 8 Yu-Gi-Oh! with the counterfeit cards. The amended complaint stated six causes of action: (1) 9 federal trademark counterfeiting and infringement; (2) unfair competition in violation of federal law; 10 (3) copyright infringement; (4) state unfair competition; (5) common law trademark infringement; 11 and (6) breach of contract. (#12, Ex. T). 12 In that action, the court granted Plaintiffs Konami Digital Entertainment and Konami 13 Corporation’s motion for a temporary restraining order as to the manufacture and distribution of 14 counterfeit trading cards. (2:08-cv-06630-VBF-PJW, “Vintage Action”, #7). The court also granted 15 Plaintiffs’ motion for a preliminary injunction. Id. at #17. Plaintiffs moved for a second temporary 16 retraining order as to the use of Konami’s trademarks, copyrights and unfair competition, as well 17 as an order to show cause regarding a preliminary injunction. Id. at #36. The court denied these 18 motions without prejudice. Id. at #81. Defendant Upper Deck filed a motion to dismiss and 19 subsequent counterclaims. Konami filed a motion to dismiss Upper Deck’s amended counterclaims 20 and the court granted that motion. (Vintage Action, #178). The court dismissed without prejudice 21 six claims of Upper Deck’s amended counterclaims as the fraud claims were not plead with 22 particularity, the fraud in the inducement claim failed, one fraud claim was time barred, and the 23 elements of civil conspiracy were not properly alleged. Id. at 2. The court denied Upper Deck’s 24 motion to transfer venue to Nevada (#141) and denied Upper Deck’s request by way of opposition 25 that it stay its ruling until this Court ruled on the motion before it. Page 2 of 10 1 III. FACTS 2 Upper Deck filed a complaint in this jurisdiction on December 10, 2008, one day prior to be 3 added as a defendant in the Vintage Action. It filed against Konami Marketing, Inc. and Konami 4 Digital Entertainment, Inc. (#1). 5 In its complaint, Upper Deck alleges proper subject matter jurisdiction pursuant to 28 U.S.C. 6 § 1332, personal jurisdiction by virtue of Defendant’s presence, substantial contacts and business 7 in the district, and because the activities complained of occurred in part in the district. Id. It alleges 8 venue is proper under 28 U.S.C. § 1391 because substantial parts of events or omissions giving rise 9 to claims alleged occurred in the district. Id. Konami Marketing is a California corporation and 10 Konami Digital Entertainment is an Illinois corporation with a principle place of business in 11 California. Id. The parties dispute if Plaintiff Upper Deck has its principle place of business in 12 Nevada or California. The supplemental pleadings have not been instructive to this as deposed 13 witnesses provided little information or plead the protections of the Fifth Amendment, as Upper 14 Deck’s Vice President of Sales John Skrajewski did. Upper Deck Company is headquartered in 15 California, but Upper Deck Nevada operates out of Clark County. The parties do not dispute that 16 Upper Deck Company assisted Upper Deck Nevada in its formation of and performance of its 17 contractual relationship under the Letter of Intent with Konami. 18 On September 30, 2006, the parties entered into a written Letter of Intent for Upper Deck 19 to be the exclusive distributor of the Yu-Gi-Oh! cards. In summer of 2008, Konami became aware 20 of counterfeit activities, culminating in the filing of the Vintage Action described above. In October 21 of 2008, Konami and Upper Deck began discussions of the counterfeiting activities and attempted 22 to arrive at a common approach to the problem. This was unsuccessful and Konami notified Vintage 23 that it intended to amend its complaint to include Upper Deck. Konami terminated the LOI in 24 December of 2008 apparently on the grounds that the counterfeiting activities were egregious 25 Page 3 of 10 1 enough to not allow for the 30-day cure period required. Upper Deck filed its complaint in this 2 district one day prior to that amendment on December 10, 2008. 3 Upper Deck’s complaint alleges the following causes of action: (1) breach of contract- 4 distribution agreement; (2) breach of implied covenant of good faith and fair dealing-distribution 5 agreement; (3) breach of contract-letter of intent; (4) breach of implied covenant of good faith and 6 fair dealing-letter of intent; (5) express indemnity-distribution agreement; (6) express indemnity- 7 letter of intent; (7) fraud in the inducement-distribution agreement; (8) fraud in the inducement-letter 8 of intent; (9) slander per se; (10) negligent misrepresentation; and (11) civil conspiracy. 9 10 Defendant has filed a Motion to Dismiss the Complaint or in the alternative, to Transfer to the U.S. District Court for the Central District of California. 11 12 IV. STANDARDS I. Motion to Dismiss Pursuant to Rule 12(b)(6) 13 Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, dismissal is appropriate if the 14 plaintiff “fail[s] to state a claim upon which relief can be granted.” Dismissal for failure to state a 15 claim under Rule 12(b)(6) is proper only if it is beyond doubt that the plaintiff can prove no set of 16 facts in support of the claim that would entitle the plaintiff to relief. Williamson v. Gen. Dynamics 17 Corp., 208 F.3d 1144, 1149 (9th Cir. 2000). The review is limited to the complaint, and all 18 allegations of material fact are taken as true and viewed in the light most favorable to the plaintiff. 19 In re Stac Elecs. Sec. Litig., 89 F.3d 1399, 1403 (9th Cir. 1996). Although courts assume the factual 20 allegations to be true, courts should not “assume the truth of legal conclusions merely because they 21 are cast in the form of factual allegations.” W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 22 1981). 23 On a motion to dismiss, the court “presumes that general allegations embrace those specific 24 facts that are necessary to support the claim.” Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 889 25 Page 4 of 10 1 (1990). However, conclusory allegations and unwarranted inferences are insufficient to defeat a 2 motion to dismiss under Rule 12(b)(6). In re Stac Elecs., 89 F.3d at 1403. 3 II. Motion to Transfer 4 Venue is proper in any district “in which a substantial part of the events or omissions giving 5 rise to the claim occurred.” 28 U.S.C. § 1391(b)(2) (1999). Section 1391(b)(2) does not require that 6 a majority of the events have occurred in the district where suit is filed, nor does it require that the 7 events in that district predominate. Rodriguez v. California Highway Patrol, 89 F. Supp. 2d 1131, 8 1136 (N.D. Cal. 2000). 9 Section 1404(a) provides that “[f]or the convenience of the parties and witnesses, in the 10 interest of justice, a district court may transfer any civil action to any other district or division where 11 it might have been brought.” 28 U.S.C. § 1404(a). District courts have the discretion “to adjudicate 12 motions for transfer according to an individualized, case-by-case consideration of convenience and 13 fairness.” Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988); Jones v. GNC Franchising, 14 Inc., 211 F.3d 495, 498 (9th Cir. 2000). Factors to consider include (a) the existence of related 15 litigation; (b) convenience of the parties; (c) parties’ contacts with the forum and the relationship 16 of claims to the forum; (d) the relative ease of access to sources of proof; (e) availability of process 17 to compel the presence of unwilling witnesses; and (f) the interests of justice in general. Stewart 18 Org., 487 U.S. at 29. 19 Defendant bears the burden of showing that the inconvenience of litigation in this forum 20 favors transfer, as the moving party. See E. & J. Gallo Winery v. F. & P.S.P.A., 899 F. Supp. 465, 21 466 (E.D. Cal. 1994). In order for a district court to transfer an action under section 1404, the court 22 must make the following two findings: (1) that the transferee court is one where the action “might 23 have been brought,” and (2) that the convenience of the parties and witnesses and the interest of 24 justice favor transfer. Hatch v. Reliance Ins. Co., 758 F.2d 409, 414 (9th Cir. 1985). 25 Page 5 of 10 1 V. ANALYSIS 2 The Court denies the Motion to Dismiss as Plaintiff has not failed to state a claim upon 3 which relief can be granted. Its complaint does not bring conclusory or insupportable allegations. 4 The question of transfer remains for the Court’s consideration. 5 A. Federal Comity Rule and the First-to-File Doctrine 6 When a complaint involving the same parties and issues has already been filed in another 7 federal district court, the court has discretion to abate or dismiss the second action. Alltrade, Inc. 8 v. Uniweld Products, Inc., 946 F.2d 622, 623 (9th Cir. 1991). An action is duplicative if the “claims, 9 parties, and available relief do not significantly differ between the two actions.” See Ridge Gold 10 Standard Liquors, Inc. v. Joseph E. Seagram & Sons, Inc., 572 F. Supp. 1210, 1213 (N.D. Ill. 1983). 11 The first-to-file doctrine requires consideration of three factors: (1) chronology of the two actions; 12 (2) similarity of the parties; and (3) similarity of the issues. See Alltrade, 946 F.2d 622 (9th Cir. 13 1991). 14 In an analogous case, Inherent.com v. Martindale-Hubbell, the court denied defendant’s 15 motion to dismiss pursuant to the first-to-file doctrine but granted defendant’s motion to transfer. 16 420 F. Supp. 2d 1093 (N.D. Cal. 2006). The plaintiff in that case alleged that the filing of a suit in 17 a different district was a “preemptive strike” by defendants and an exercise in forum shopping, and 18 as such should mitigate the application of the first-in-time doctrine. Id. at 1099. As such, the court 19 denied dismissal of the current action because application of the first-in-time doctrine would punish 20 the plaintiff who had attempted to resolve the suit before filing an action. Id. at 1100. The key 21 dispute in both actions was whether or not the parties’ letter of intent gave rise to a binding contract 22 and if it was breached. Id. at 1099. The court held that a ruling on the fraud issue in the case before 23 it would be intimately intertwined with the factual and legal considerations surrounding issues in 24 the case in the other district. Id. 25 Page 6 of 10 1 Regarding the transfer alternative, the court examined the convenience to the parties and 2 witnesses and serving the interests of justice in that the other forum’s law was applicable; it was the 3 location of the majority of witnesses; consolidation with the first-filed action was feasible; and that 4 the forum had personal jurisdiction over both parties. 420 F. Supp. 2d 1092 at 1101. 5 In the present case, Defendant argues that the action should be dismissed based on principles 6 of comity and the earlier-filed Vingtage litigation and improper forum shopping. (#11 at 5–7). They 7 discuss the doctrine of federal comity allowing the Court to dismiss, stay, or transfer a case to avoid 8 overlapping litigation in two forums. Id. at 5. Their contention is that Upper Deck’s role in the 9 distribution of counterfeit Yu-Gi-Oh! cards is a key issue in this case, as well as the Vintage Action. 10 Id. This apparent breach of the Letter of Intent is at issue in both litigations, pursued by Konami in 11 Vintage and Upper Deck in this action. Id. at 6. Additionally, Defendant contends that even if the 12 first-filed rule does not apply, Upper Deck has an exhibited an improper motive for filing this 13 lawsuit: forum shopping by the attempt to evade the jurisdiction of the Central District. Id. at 7. 14 Plaintiff responds that the first-to-file doctrine favors it. (#15 at 14). It argues that Konami 15 cannot meet the doctrine’s elements because Upper Deck was the first to bring suit against Konami 16 and file a breach of contract claim; the matters do not include the same parties; the matters involve 17 different issues; and it alleges that Konami filed its amendment in an attempt to forum shop. Id. at 18 14–18. 19 1. 20 Plaintiff filed its complaint for the case at bar on December 10, 2008. Defendant filed its 21 amended complaint adding Plaintiff as a party in the sister-action in California on December 11, 22 2008. In its supplemental pleadings to the Court, Upper Deck states that long-standing grievances 23 led to the filing of its complaint, not a hasty attempt to file before being added as a defendant in the 24 California action. 25 dissatisfaction with Konami’s marketing and product development. These internal communications Chronology of Two Actions To support this claim, it provides internal communications concerning Page 7 of 10 1 are insufficient to support the assertion that Upper Deck was on the verge of a lawsuit. Additionally, 2 the communications are from earlier in the year. The timing of the filing in Nevada appears to the 3 Court to be indicative of a last-minute filing on the part of Upper Deck to be first-in-time and 4 attempt to rely on federal rules of comity. It was far more apparent to Upper Deck that Konami was 5 adding it as a Defendant in the California action than it was to Konami that Upper Deck would 6 commence this suit. 7 2. 8 The original parties in the sister action are Defendant and its distributor Vintage. However, 9 with its amended complaint, Konami added Upper Deck as a defendant. In that regard the parties 10 Similarity of the Parties are the same, although the extent of the issues in the sister-action are different. 11 3. 12 These two actions, the Vintage Action and the one presently before the Court, address similar 13 issues. Konami’s filing against Vintage regarding the counterfeit cards expanded to include 14 Konami’s distributor, Upper Deck. The amended complaint alleges breach of contract by Upper 15 Deck’s distribution of counterfeit cards and falsely holding out itself out as Yu-Gi-Oh’s trademark 16 holder on its website. (#12, Ex. T). Upper Deck’s complaint alleges that Konami has breached the 17 Letter of Intent by refusing to participate in negotiations to put a formal distribution agreement into 18 place and that it has breached the Distribution Agreement in multiple ways. (#1 at 5). The matters 19 both involve the alleged breach of the Letter of Intent and/or Distribution Agreement. Defendant 20 argues that Upper Deck’s claim for slander rests on the notion that Defendant made knowingly false 21 statements regarding its distribution of counterfeit trading cards. Defendant also argues that Upper 22 Deck’s claim that Konami wrongfully terminated the LOI rests on evidence of counterfeiting 23 activities and the interpretation of the “Intellectual Property” clause of the LOI has already been 24 determined by the Central District in the sister-action. Additionally, it argues that the other claims Similarity of the Issues 25 Page 8 of 10 1 for breach of the 2006 contract require interpretation of the LOI which is governed by California 2 law. 3 However, the underlying litigation in the Vintage Action surrounds the counterfeit cards, 4 while this action addresses a much larger array of alleged breaches of contract. Where the Vintage 5 Action addresses counterfeit cards and wrongfully claimed trademark ownership on a website, the 6 present action involves not only breach of contract on both the Letter of Intent and Distribution 7 Agreement, but breach of implied covenant of good faith and fair dealing, a demand for indemnity, 8 fraud in the inducement, slander per se, negligent misrepresentation, and civil conspiracy. 9 Overall, an examination of the three factors supports the Court’s determination that the 10 action should not be dismissed, but that it should be transferred to California. 11 B. Interests of Justice and Convenience of Parties and Witnesses 12 “The question of which forum will better serve the interest of justice is of predominant 13 importance on the question of transfer, and the factors involving convenience of parties and 14 witnesses are in fact subordinate.” Wireless Consumers Alliance, Inc. v. T-Mobile USA, Inc., 2003 15 U.S. Dist. LEXIS 26802, at *12 (N.D. Cal. Oct. 14, 2003). 16 Among the factors relevant to the convenience of the parties and witnesses, courts 17 consider the following factors: (1) the plaintiff’s choice of forum; (2) the convenience of witnesses 18 and the parties; (3) the familiarity of the forum with the applicable law; (4) the ease of access to 19 evidence; and (5) the relative court congestion and time of trial in each forum. Gulf Oil Co. v. 20 Gilbert, 330 U.S. 501, 508–09; Jones, 211 F.3d at 498–99. 21 Upper Deck appears to have equal presences in California and Nevada, based on the 22 declarations on file with the Court. Upper Deck claims to be a separate entity from the Upper Deck 23 Company, LLC, located in California, and claims to be solely a Nevada corporation. (#15 at 14). 24 Konami operates its principle place of business in California and asserts that the majority of 25 Page 9 of 10 1 witnesses for the present action are in California. (#22 at 8). The convenience for attorneys and 2 witnesses appears to be split between Nevada and California and thus it is not a determining factor. 3 California has both subject matter jurisdiction and personal jurisdiction over both parties. 4 As Upper Deck itself points out, the commute from Las Vegas to Southern California is not a long 5 one, and as California law governs their agreement, California as a venue is more convenient for 6 both parties and witnesses, and as the transfer will not unduly delay the action, it should be 7 transferred to the Central District. The California forum is appropriate. 8 VI. CONCLUSION 9 Plaintiff presents a viable complaint and accordingly it is not dismissed. Though imperfect, 10 Defendant’s argument is stronger to transfer the action to the Central District of California where 11 it is mutually convenient. IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss is 12 DENIED. IT IS FURTHER ORDERED that Defendant’s Motion to Transfer, in the alternative is 13 GRANTED. (#10). 14 DATED: September 17, 2009 15 16 17 __________________________________ Robert C. Jones United States District Judge 18 19 20 21 22 23 24 25 Page 10 of 10